What's the difference between stock and stock options? and The Old Joint Stock, Birmingham UK

What's the difference between stock and stock options?

Much of CEO pay has taken the form of stock options rather than grants of stock.Which form of compensation gives the CEO greater incentive to increase shareholder value: one million dollars in stock or one million dollars worth of stock options?


Stock best answer:

Answer by Buy the Numbers
There is a big difference. Unless the company goes bankrupt, the stock will always be worth something. Options can easily lose all their value if the stock goes down even a small persentage.

Options are a leverage tool. Options are usually issued with a strike price based on the stock's value when the options were issued. So if the stock goes up, the gain on the options will likely be much larger than the stock. If the stock goes down, then the options will be worthless (assuming that their strike price was based on the stock's original value, as I had stated).

To truly tie CEO compenstaion to performance, the best idea (for the shareholders) is to issue the CEO options with a long vesting period that goes beyond the time the CEO leaves the company. This way, if the CEO's decison increase LONG-TERM stock value, he will profit. If not, no bonus. As is clearly evident in the financail sector, short-term profits often come at the expense of long-term viabilty.

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The Old Joint Stock, Birmingham UK


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A warm Christmas atmosphere in The Old Joint Stock, in Temple Row West, Birmingham England.

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The OLD JOINT STOCK Pub is located in the heart of Birmingham's city centre amongst the banks and international commerce and opposite the cathedral. Built in 1864, this grade two listed building was designed by Julius Alfred Chatwin, best known as a builder of many Victorian churches. Prior to being taken over by Lloyds Bank in 1889 it was the Birmingham Joint Stock Bank.

www.oldjointstocktheatre.co.uk/rte.asp?id=10

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